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Financial advisor Lorraine Cooke shares what you should know.

JANUARY IS ALWAYS a time when your financial situation suddenly comes into focus. It’s also one of the best times to break habits that aren’t working for you – and getting the right offering from your bank can be a central part of that.

If Christmas 2017 ended in an overwhelming credit card bill, it might be time to look at whether your current credit card is right for you and whether its rates are the best that you could potentially be getting.

Here’s how to do it in four very simple, straightforward steps, with advice on each from tax and financial advisor Lorraine Cooke of Jigsaw Financial Solutions.

1. Check out the competition

Switchyourbank.ie will give you a snapshot of the credit card options that are available with major providers, giving you an overall idea of how your current card compares, and which might be a better deal. The Competition and Consumer Protection Commission also have a more detailed, dedicated comparison tool.

This particularly applies for those who don’t have a balance to transfer, who need to be mindful of checking these rates before they select their credit card.

Another thing to bear in mind when deciding on a new card is your credit limit, says Cooke who iterates that a higher limit could actually be detrimental at a later stage:

If for example your limit on a credit card is €5,000 and you’re looking for a mortgage, the bank would look at this as it reduces your net disposable income to repay the mortgage. Credit limits can creep up over the time so do ask it to be lowered if you can.

2. Apply for a new credit card

This can be done by filling in an application form either online or in a branch. You need to be over 18 and have an annual income over a certain amount, sometimes set at €16,000 a year, depending on the bank.

You’ll need the following info: your bank details, current credit card, loans and savings accounts, mortgage (if any), current account and income. In terms of setting the right limit for yourself, it does depend on what you are using the credit card for, but Cooke has the following advice:

If you are just using it for emergency cash coming up to payday, maybe a €600 – €1,000 limit is all you need.

However, do be mindful of how you access the cash in your credit card account if so:

Be careful of cash withdrawals from your credit card account as there will usually be a charge in place and if you are going for a mortgage this can be negatively viewed. If you are withdrawing cash, do this from your ATM with a debit card ideally.

3. Close your old credit card account

Source: Shutterstock/Zivica Kerkez

You’ll need to cancel in writing any direct debits you have on your old account. Once you’ve done that, write to your old credit card company requesting the account to be closed and your card to be cancelled.

This is an extremely important step of switching, says Cooke:

The danger is that you’ll use both credit cards. You might think you won’t use the other but circumstances change and suddenly two bills might come at once that need to be paid but it’s too easy to build up further debt if you don’t close the original credit card account.

If you’ve paid stamp duty in 2018, they will send confirmation that your account is closed and you can send this to your new credit card company to avoid being charged stamp duty twice in one year. Also be sure to “shred the old card with a scissors or shredding machine”, says Cooke.

4. Set up your old direct debits

Once you receive your card approval from your new company, be sure to set up any pre-existing direct debits to ensure things like gym memberships and subscriptions are paid for without a hitch.

Cooke has the following advice for ensuring everything goes smoothly with the new one:

Sign the back of it and keep it safe. With so much fraud in terms of card phishing and contactless now, you need to be mindful.

And how best to stay in check? Be smart about your saving says Cooke, who has two specific suggestions:

Firstly, a lot of banks are offering reward deals with credit cards, so if you spend in shops over certain amounts or on certain days, you can get cash rewards. There are no essential catches to these, they’re a positive thing so people should sign up to those and be aware of them.

If you do find yourself in debt, reach for savings if you are able to, rather than taking more loans to pay off your credit card bill, says Cooke:

I never like to see clients top up mortgages or take out a personal loan in order to clear short term debt. If you’ve got any savings, use them to clear credit card debt – most interest rates are 0% at the moment so they’re not earning you anything but credit card interest rates can really cost you.

Think you’d be under less financial pressure if you switched your credit card? Switchyourbank.ie has all of the resources you’ll need to decide if it’s the right option for you, along with a comparison table of all the current rates for Irish customers.

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